(March 20): Once touted as a haven for investors to navigate Donald Trump’s tariff wars, Southeast Asia has all but lost that appeal as a region-wide stock rout deepens.

With Tuesday’s collapse, Indonesia comes close to Thailand in posting the biggest loss this year among 92 major equity benchmarks tracked by Bloomberg. Malaysia is among the bottom ten performers. Few expect the gloom to dissipate soon as local economic woes come to a head and traders realise the sweeping impact of Trump’s disruptive policies.

For those who had pinned hopes on the region’s status as a supply chain alternative to China, it’s a reminder of the inherent risk of investing in emerging markets. Fears of President Prabowo Subianto’s consolidation of power is convulsing Indonesian assets, while pessimism about Thailand’s economy runs so deep that market-rescue efforts have failed. Malaysia’s chip exports are at risk from Trump’s sectoral tariffs.

“The weak macro and politics across Asean is exacerbating negativity on the region at a time when the world is digesting a trade war and a jump in China’s AI prowess,” said Xin-Yao Ng, an investment director at Aberdeen Investments. “I suspect there’s no immediate reason to get back to Asean.”

Global funds are leaving en masse, helping to push the MSCI Asean Index into a correction.

Five markets in Southeast Asia are on course for a sixth consecutive month of withdrawals by foreigners, according to data compiled by Bloomberg. Indonesia has seen almost US$1.8 billion (RM7.97 billion) pulled out this year, the most among peers.

The outflows underscore the region’s diminished appeal at a time when Chinese stocks have become all the rage. The EM ex-China trade — which has gained traction through last year — is unraveling as China’s equities outperform on DeepSeek’s technological prowess and improving economic outlook.

While Trump’s first term delivered some windfall to Southeast Asia as global companies shifted manufacturing bases away from China, his hostility toward all trade partners this time around is having a broad chilling effect.

The US president said reciprocal tariffs and additional sector-specific tariffs will be imposed on April 2. While that may warrant more monetary easing, Bank Indonesia’s rate hold decision on Wednesday shows currency concerns can limit policy room.

The Jakarta Composite Index has fallen 20% from a September record, with Jahnavi Bhagwati of Koka Capital saying the market has “suddenly woken up” to risks. Prabowo came to power with expectations that he will extend former President Jokowi’s pro-business stance. Instead, his populist policies and an overhaul of how state companies are managed have spooked investors.

Since Prabowo took office, “policies have become a lot more centralised than in the past,” which coincided with the weakness in most EM currencies, said Kenneth Tang, senior portfolio manager at Nikko Asset Management. “All that just gives investors the perfect excuse to reassess risk.”

The recent drop across Southeast Asia has triggered some dip-buy calls, given the cheap valuation. UBS Group AG analysts this week upgraded Thailand to overweight, saying that the impact of policies behind the selloff has passed. In a separate note, they said Indonesia now offers a buying opportunity.

Thailand’s SET index is trading at 12 times forward earnings estimates, compared with a three-year average of 14.5. The ratios stands at around 10 for Indonesia and the Philippines, all below their multi-year averages.

Yet there’s plenty of reason for caution.

Deep-rooted concerns about Thailand’s high household debt and corporate scandals have pushed stocks lower despite a US$4.5 billion initiative to support the market. In the Philippines, developments over former President Rodrigo Duterte’s arrest is compounding headwinds.

“It looked like Asean will be a beneficiary of the US-China tariff war, but each one of Asean market has specific issues that are now coming to the fore,” said Nirgunan Tiruchelvam, an analyst at Aletheia Capital in Singapore. 

Uploaded by Jason Ng